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How France views wealth: culture, economy and government

To many observers, France would seem to be having a crisis of confidence. A deeply unpopular president and a weak economy, high taxes and high youth unemployment would suggest a challenge to the belief of French superiority in a proud and great nation. One of our students spent a year split between Lyon (where she studied at the ENS Lyon) and Paris (where she did research at the Pasteur Institute). Her cultural report describes the difficult relationship between the French ideals of liberty, equality and fraternity and the Western drive to wealth. No images in her report, but here’s a photo I took of some French dudes in Lille.

L’exception française embodies the popular notion prevalent in France that the French are in some way “different” from everyone else. One must not look hard in history or French culture to understand how this idea has developed. France does after all provide exceptional food, wine, landscapes, architecture, art and literature. The exception française has often been used to defend economic or political positions that may seem unfeasible, even slightly ridiculous to the rest of the world; however, as far as the French are concerned, their way has worked in the past and will continue to do so. Having said this, this paper seeks to consider whether the exception française also pertains to the French’s perception of wealth. This issue is particularly pertinent due to the recent fiscal scandal that erupted following the famous French actor Gérard Depardieu’s move to Russia in reaction to the proposed “rich tax” of 75 percent on households earning over one million euros. Whereas some countries such as the United States embrace wealth, and many others are ambivalent towards it, such as the United Kingdom, it seems that France is rather adverse to it. Indeed it appears that France is exceptional compared to other developed countries with regards to how it views wealth, and this paper will explore the nature of this attitude from a cultural, economical and political perspective.

Emergence of modern French attitudes towards wealth

A good starting point in considering France’s sentiment towards wealth – as for many other aspects of French society for that matter – is the French Revolution of 1789-1799. This event, although more recently has been questioned for its conclusiveness, marked a turning point in the nation’s history. The way in which it has been interpreted throughout the ages and what it has come to represent has had a profound effect on the French, their values and their identity, and is a matter of great pride for the country.

The modern French populace perceives the Revolution as a victory for the universal human rights of “liberté, égalité, fraternité” (the national motto which finds its origins in the Revolution), which replaced the previous regime of privilege. In the years leading up to the Revolution, the monarchy and the nobility were increasingly perceived as decrepit, self-centered, spoilt with privileges and oppressive. Their detachment and obliviousness to the general population is often embodied within a line famously attributed to Marie Antoinette, Louis XVI’s wife, “Qu’ils mangent de la brioche”, or “let them eat cake”, which she apparently uttered upon learning that the peasants had no bread. Many factors such as financial disarray, ideological changes driven by the Enlightenment, the rise of the Bourgeoisie and food scarcity ultimately lead to a popular rebellion in which King Louis XVI was overthrown (Hampson, 1963). He was subsequently beheaded which for many embodies the end of the repression of the general population at the hands of the aristocracy.

As a highly revered landmark in French history, the values that brought about the Revolution and came to define it have become entrenched in France’s society. Any consideration of how the French perceive wealth has to build on the notions of equality developed during the Revolution.

Rise of the state and the role of the individual

Since the liberation in 1945, France has adopted and developed a dirigste model. This model is also perceived as a source of French exceptionalism and involves the intervention of the state in economic matters; this can be contrasted to a laissez-faire model of free market capitalism (Knapp and Wright, 2006). Dirigisme has come to signify a means of economic development in which policy making is subject to rational thought, in order to allow progress and stability. The dirigiste model is intertwined with the promotion of equality and sees the state take on the responsibility of being the provider, buffering its citizens and, most importantly, redistributing wealth (Economist, 2009). A dirigiste approach has historically generated wealth and assured equality, and is still very present in modern-day France.

A forefather of dirigisme was Jean-Baptiste Colbert, Louis XIV finance and industry minister (Knapp and Wright, 2006). Colbert promoted a regime of state interventionism, which paved the way for France to become the strong, centralized state of today (Economist, 2006). He devised programs for the construction of infrastructure and took measures to develop the countries industries and economy (Economist, 2009). Trust in a dirigiste state was reinforced following the French Revolution and during Napoleon’s rule. France’s pride in their model and the belief in its universality was so great that it inspired them to try to disseminate it across the world. Charles Pasqua, a former Gaullist interior minister once said, “When we organized our state we were bold enough to imagine that it was a model not only for France but for the whole world” (Economist Survey, 1999).

The success of the model during the trente glorieuses, the 30 years of remarkable economic growth following World War II, is a further source for its respect (Economist Survey, 1999). The growth paved the way for the country’s transition from a heavily rural economy to a modern industrial age. France became one of the top industrial powers and a leading exporter (Economist Survey, 1999). Despite its heavy hand, France is also home to a multitude of great, highly-profitable companies, with the largest cosmetics group worldwide L’Oréal, the food giant Danone, the largest water company Vivendi, Europe’s largest insurer AXA, the luxury goods company LMVH and one of the leading pharmaceutical companies Sanofi being some of the most powerful.

The rise of the French state laid the foundation for one of Europe’s most generous social welfare systems. France spends more on social protection relative to GDP than any other country in the OECD rich club. The unemployed can get up to 71,760 euros a year, for up to two years, depending on their previous income (Economist, 2011). As a result of such great giving, France has one of the lowest levels of poverty rates in the OECD (Economist, 2011). The French pride themselves with their social system, which has become a symbol of national identity. Attempts to reform it in the past have faced huge opposition and rarely go through. Most recently, in 2010, the public flooded the streets nationwide to protest against the previous president Nicolas Sarkozy’s plans to raise the retirement age from 60 to 62. Ironically, the reform which did go through in the end, has now been reversed by the current president François Hollande (Economist, 2012a). This leaves France with one of the youngest retirement ages in Europe.

Anti-capitalism (anti-Americanism?)

In the last couple-hundred years France has exhibited a prevalent anti-capitalist sentiment; a key landmark in the evolution thereof occurred in 1871 during La Commune. At the prospect of another generation of conservative, royalist policies, the Parisians revolted and took hold of the capital. Soon they established their own government, La Commune, to represent their socialist and republican ideologies. Although it only lasted 70 days, numerous progressive political measures were set up, including municipal canteens for the poor, a minimal wage for workers, empty homes were offered to the poor, as well as freedom of press, separation of church and state, and secularization of education (Poirier, 2011). Despite La Commune’s bloody end, it inspired many thinkers and politicians, and although not as widely revered as the French Revolution, has played an important role in shaping modern France’s relatively socialist ideologies.

Around the 1950s France experienced a wave of anti-Americanism, with General Charles de Gaulle famously proclaiming that France would demonstrate to everyone how to “build an industrial civilization which is not derived from the American model and in which man will serve as an end, not a means” (Economist Survey, 1999). In the 1940s, in describing her visit to the United Stated, Simone de Beauvoir referred to America as the country where “capitalist oppression had triumphed in the most vile fashion” (Economist Survey, 1999). As a result, the French have often differentiated themselves from Americans through their strong sense of equality and community, which dates back to the French Revolution. Nowadays, in French politics, there are not many abuses worse than calling someone “ultra-liberal” – a term largely associated with the American ways of brutal, uncultured capitalism (Economist Survey, 1999).

Although the anti-American attitude is still popular nowadays, it seems that it has developed into a more general anti-capitalist sentiment. The French often claim that capitalism as conducted abroad just does not work for their country. A survey conducted in 2011 suggested that the French are even more anti-capitalist than the Chinese, a communist country. It showed that 33 percent of people are of the opinion that capitalism must be abandoned; out of ten countries, this was the largest proportion (Reuters, 2011). A previous pole in 2006 suggested that 36 percent of the French believed that the free market is the best system, while in the United States and Britain the proportion was almost twice as high at 71 percent and 66 percent respectively (Wyatt, 2006). It seems that politicians have actively maintained this sentiment, with five out of twelve candidates in the 2007 presidential election being explicitly anti-capitalist (Economist, 2008).

Although with France’s big companies and international banks it is difficult to reconcile the idea of anti-capitalism, the existence of the latter cannot be denied.

High culture versus old wealth versus new economy

Mr. Hollande himself proclaimed during his election campaign that he does not like the rich. The wealthy in France are in no way revered as in the United States, where people of the likes of Warren Buffet, Bill Gates and Steve Jobs are celebrated as heroes, and the pursuit of wealth is actively encouraged, as embodied within the “American dream”. Indeed, the French political thinker Alexis de Tocqueville noted in the 1840s that “the love of wealth is […] at the bottom of all that Americans do” (Easton, 2012). Perhaps this cultural difference is down to the fact that much of the wealth in France originates from old money. In the United States on the other hand, many of the rich are self-made, and are perceived to be closer to the realities society faces; they are generally also greater risk-takers than Europeans and for this reason they are wiser to the idea of loss. Indeed, Vincent Grandil, a partner at a law firm which deals with tax issues for corporations and wealthy individuals explains “French people have an uncomfortable relationship with money. Here, someone who is a self-made man, creating jobs and ending up as a millionaire, is viewed with suspicion” (Alderman, 2012). As a result, France’s wealthy tend to stay out of the public eye, such as Liliane Bettencourt, L’Oreal’s heiress, and unlike in the US, they do not possess a spirit of charity. Buffet and Gates for example have pledged half their fortunes to The Giving Pledge, an effort to commit wealthy individuals to dedicating their wealth to philanthropy; in France, it is difficult to find equivalents. It is for this reason that the rich in France seem to create animosity, not to mention the egalitarian aspirations they do not conform to.

Current drivers

In addition to these deep-seated historical and cultural factors that have shaped its perception of wealth, there are also recent developments that are pertinent to the discourse on wealth.

Competitiveness is not in the French motto

France’s competitiveness is declining rapidly, which many outsiders attribute to its insistence on the French model. In the latest World Economic Forum global competitiveness ranking it fell from 15th two years ago to 21st (Schwab, 2012). Its share in global and eurozone exports has also fallen steeply (Financial Times, 2013). The balance of trade is 70 billion euros in deficit, compared to Germany’s 150 billion euro surplus (Carnegy, 2012a; Taylor, 2012). Unemployment is rising above 10 percent as jobs in the industrial sector are being cut (Financial Times, 2013). France’s high public spending is being blamed and businesses demand it must be cut in order to reduce the deficit, rather than relying on tax rises. Businesses insist that labor costs must be reduced; the French government on the other hand denies that labor costs affect its competitiveness (Economist, 2012a). Nonetheless, many companies are considering moving high-paid executives out of the country, with many having already left to places such as Britain, Belgium, Switzerland and the United States (Carnegy and Daneshkhu, 2012). Similarly there is speculation that many companies are putting-off investing in France and moving or hiring new employees (Alderman, 2012).

France’s loss of competitiveness has inevitably affected its growth, which has remained stagnant over the past years (Economist, 2012a). Since the trente glorieuses, France has increasingly relied on public spending to generate it; however, it has not managed to balance its budget since 1974 (Economist, 2012a). 15 years ago, public spending was similar to the level in Germany, but less than Sweden’s; since then, it has risen to 57 percent of GDP, five points above Sweden’s and ten above Germany’s (Economist, 2012a). This reignites the debate around the French model, suggesting it may no longer be able to keep up with the changes the country is facing. The exception française is now alive more than ever as France struggles to maintain its excellent infrastructure, healthcare and pension schemes at the backdrop of enormous amounts of debt, which has further been aggravated by the eurozone crisis. Indeed, the presidential debates last year were mainly focused on preserving the French lifestyle. Mr. Hollande has now vowed he will not make changes to the 35-hour working week, which for France is a great matter of pride, yet for the rest of the world illustrates its disconnection from the global economic reality.

Complications of starting and running a business

Despite many of France’s powerful, established businesses, the country makes it difficult to set up new ones and subsequently to generate new wealth. In the last 50 years, hardly any new companies have made it to the top in the Bourse de Paris. This inhospitality became evident with the uprising of a popular movement called Les Pigeons last year. Under this name, entrepreneurs collectively launched a wave of demonstration against the government’s plans to impose a steep increase to capital gains tax. The plans included a 45 percent income tax rate on entrepreneurs that sell their company after 10 years, and on top of this, another 15.5 percent of social contributions, presenting a tax of over 60 percent (Butcher, 2012). This would almost double the current rate of 32 percent and the UK’s and Germany’s rates of 28 percent and 26.4 percent, respectively; Belgium on the other hand has no capital gains tax (Carnegy, 2012b). As a result, it seemed that capital gains would be taxed more than art transactions, real estate investment, and public stock purchases (Carnegy, 2012b).

During the protests, which occurred predominantly online, entrepreneurs changed their profiles to picture of pigeons – slang for victims in French, referring to them feeling like fall guys. In a letter addressed to the President published in multiple national newspapers, Les Pigeons said “Your government has gone too far[…]killing the spirit of enterprise. Mr. President, don’t export our entrepreneurs, don’t export our growth, export our products. Listen to us and let us create growth and employment!” (Carnegy, 2012b). Jean-David Chamboredon, one of the founders of the protest group and an investor in digital start-ups, remarked “I want to stay in France and I will continue to fight for a tax regime to make that possible” (Carnegy and Scheherazade, 2012). However, he also predicts a decrease of up to a half of business investment for this year and the death of hundreds of start-ups.

Some entrepreneurs have just left all together, not only because of the high taxes but also due to a general anti-business culture. Mr. Boitouzet, the owner of an online brokerage firm he has just moved to Belgium explains that “this is a country where there is no growth, the cost of labor is very high, and when entrepreneurs succeed they are criticized for exploiting their workers” (Carnegy and Scheherazade, 2012). France is now also facing competition from other countries for its entrepreneurs. Canada’s Quebec region is promoting a program to attract 50,000 of them (Butcher, 2012). Britain also managed to lure many tech startups around the Olympics and other events.

Even though there is a longstanding history of people leaving France to avoid high taxes, it seems that currently people are leaving before they have even made their wealth.

The “rich tax”

This desire to cling on to what seems an outdated model to the rest of Europe has set the scene for France’s most recent fiscal feud, which was ignited as Gérard Depardieu announced he would be seeking Belgian nationality, effectively taking a stance on France’s punitive tax rates (Economist, 2012b). In a bizarre turn of events President Vladimir Putin personally granted him a Russian passport. Depardieu was subsequently exposed to a torrent of abuse. Jean-Marc Ayrault, the prime minister of France, labeled it “pathetic”, and accused him for lack of “patriotism” (Economist, 2012b). The European minister Bernard Cazaneuve stated “when a country has given you a lot, there are moments …when you must give a bit back.” Depardieu estimates that over the last 45 years he has paid 145 million euros in taxes, proclaiming that “success, creativity [and] talent” are being punished in this way (Economist, 2012b).

At the root of this situation is France’s tax take, which at 44 percent of GDP is ten points above OECD average (Economist, 2012b). On top of this, Mr. Hollande has just tried to introduce a 75 percent top income-tax rate on household earnings above one million euros. On the other hand, Russia has a significantly lower flat income tax rate of 13 percent. The Constitutional Council dismissed Mr. Hollande’s 75 percent top income-tax rate on the grounds that it breached constitutional principles of fiscal equality between households, a foundation of France’s tax code (Crumley, 2012). Nonetheless, the measure is to be revised and resubmitted to parliament within the next year. The president insisted “[he] will always ask more from those who have the most” (Carnegy, 2013). “If you love France,” he says, “you must serve the country” (Carnegy and Scheherazade, 2012). Mr. Hollande presents this as a symbolic measure, rather than a means to raise money. After all, the tax is estimated to raise little over 200 million euros a year (Carnegy, 2013). For this reason, the move is considered as a cultural hostility towards the rich. This is especially so as higher taxes are often associated with a decline in activity, which would increase the deficit. Many are worried that by targeting big companies and the wealthy, Mr. Hollande is alienating the business community at a time where growth and investment is vital for the country (Carnegy and Daneshkhu, 2012).

Depardieu is not the latest in a string of high-wealth individuals leaving the country. Bernard Arnault, the CEO of the luxury goods conglomerate LVMH and France’s richest man, is planning a move to Belgium, and has also transferred a large portion of his fortune there (Willsher, 2013). Arnault, who is 63, insists he is not evading taxes, but rather wishes to preserve his company in the chance that he dies. When Bernard first announced his move last year he was heavily criticized, with the left-wing newspaper Liberation headlining “Get lost, rich idiot” (Kaznowska, 2012). More recently, the newspaper accused him of “forgetting the country which has made him a king” (Willsher, 2013). Nonetheless, Arnaud has not been granted nationality, although the Belgian parliament is yet to make a final decision.

Interestingly, as a country, France has fewer millionaires per million people compared to benchmark states such as the United States, the United Kingdom, Germany or Switzerland (The Boston Consulting Group, 2012); this perhaps in itself is demonstrative of France’s antipathy towards wealth, and various factors, such as a long history of tax exile, an inhospitable wealth-generating environment, and difficulty in attracting wealth are all probably involved.

Socialist politics

Many see Mr. Hollande’s move to increase taxes and keep the 35-hour working week as an attempt to secure his position as a socialist and win public approval, which has plummeted since his election. The legislation was part of his presidential campaign, gaining three-quarters of the public’s support. Analysts believe it was key to aiding Mr. Hollande win against Mr. Sarkozy. It is also an easy move to dampen public dissatisfaction with the current state of the country in the wake of the eurozone crisis and other austerity measures that are likely to come which may see cuts to social and welfare programs (Alderman, 2012); in this case the rich are an easy target.

Concluding comments

It seems that France’s exceptional view towards wealth is embedded in a deeply intertwined mesh of cultural, historical, political and economic factors. The feeling of animosity towards wealth and the inequality it generates was developed during the French Revolution and came with the realization that it defies the fundamental rights of humans. Following the liberation, the dirigiste model flourished and brought great economic success to the country, and paved the way for the strong and generous social system of today. This in turn highlights the importance the French place on equality, and as wealth is incompatible with this ideal, embodies their hostility towards it. The anti-capitalist culture that has developed in France throughout the centuries is another source of the French’s attitude towards wealth, for capitalism is founded upon the aspiration for individual, rather than societal wealth. La Commune was important in promulgating socialist ideals across society, which to this day seem pertinent given, for example, the election of a socialist president and the wide support for tax increases.

The French model has proven successful for the country in the past in generating growth while ensuring a high sense of equality; however, whether it can continue to do so remains to be seen. Many doubt that France can maintain such a high level of fiscal burden, along with some of the shortest working hours in Europe, high job protection, early retirement age and a very generous welfare system. Furthermore, France is doing very little to stimulate wealth by imposing large tax burdens on individuals and businesses, and equally to retain them as they are forced into tax exile. Mr. Hollande has made great promises for economic reform without the need for austerity, but to many this seems too optimistic. It seems that the discourse regarding wealth, wealth generation, and taxation will continue and is likely to become intensified as it merges into a fundamental debate about economic competitiveness and social cohesion in France; it will require skilled craftsmanship to find an effective solution.